The partisan self-interest behind political donations regulation

In my Australian op-ed for my new CIS paper on political expenditure laws I begin by paraphrasing a famous Adam Smith comment on cartels:

ADAM Smith, the great 18th-century economist and philosopher, famously observed that people of the same trade rarely get together without the conversation ending in some conspiracy against the public. When the Senate meets again after the winter recess, members of the same trade — party politics — will decide on how to regulate their political competition.

I’m referring of course to the bill to ban all foreign-sourced and anonymous above $50 political donations to NGOs, plus lower the expenditure and donations disclosure thresholds from $10,900 every 12 months to $1,000 every 6 months.

Proposals to regulate political donations are almost invariably accompanied by high-minded concerns about protecting the political process from improper influence through donations. But one of the great ironies is that while attempts to show improper influence by donors almost always fail, there is one clear prima facie case of the parties being corrupted by donations considerations: the disclosure law itself.

As I have documented before on this blog, the Liberals are quite blatant about their attempts to use electoral law to get at their political opponents. But both parties have an interest in undermining major competitors for political support and involvement.

And I very much doubt anyone in Labor seriously believes that $1,000 donations are likely to corrupt government decisions. Even crooked pollies would have enough self-respect to ask for more than that. The purpose is to deter Liberal donors who don’t want their names made public, for fear that it will compromise their business dealings with government.

Donations regulation is a grubby business, in which partisan self-interest triumphs over the public interest.

36 Responses to “The partisan self-interest behind political donations regulation

  • 1
    caf
    August 3rd, 2009 10:26

    The ban on foreign-sourced donations would appear to be a bipartisan Liberal/Labor shot at the Greens.

  • 2
    Don D'Cruz
    August 3rd, 2009 17:31

    You question the motives of everyone else, but about your motives, Norton?

    It would appear that you are guilty of the very sins that you are accusing others of.

  • 3
    Andrew Norton
    August 3rd, 2009 17:41

    Naturally, I don’t want to file any reports. But unlike the people I am criticising (including impliedly the NGO work Don did when he worked at the IPA) I am not advocating using the state to get at my political opponents. Indeed, groups whose views I generally disagree with such as the ACTU, Greenpeace, etc already carry the principal compliance burden of the disclosure regime, and I am calling for it to be lifted so that they can express their views free of any threat of legal punishment for bungled reporting and finance that expression without their donors being penalised.

  • 4
    Don D'Cruz
    August 3rd, 2009 18:08

    What about the laws governing charities? There was no discussion of it in your paper? Are you calling on those laws to be changed as well?

  • 5
    Andrew Norton
    August 3rd, 2009 18:17

    I did use a charity example. I would treat all organisations other than political parties equally under electoral law, with no donations or expenditure disclosure needed unless they are closely associated with a political party.

    It wasn’t a paper about the whole NGO scene, just electoral law.

  • 6
    Don D'Cruz
    August 3rd, 2009 18:30

    That is just absolute rubbish.

    What you are doing is allowing for opening for soft money in the Australian electoral process by opening up loopholes.

    Naturally, organisations like CIS would be beneficiaries of this by attracting the support of people who want to be involved in the political process but want to avoid disclosure.

    Thanks to the disclosure regime, the ATO actually stripped a charity of its status for in engaging in partisan political activity. The regime is working. There are limits on the purposes which charities can use their charitable donations. If it wasnt for the disclosure regime, they would be free to do engage directly in elections in a partisan manner without having to disclose their involvement.

  • 7
    Don D'Cruz
    August 4th, 2009 10:56

    I’m curious. In relation to disclosure, do think that CEOs of NFP should list their remuneration in annual reports like corporate leaders? Or are you like your CIS colleague Humphreys who feels that neither should have to disclose such information?

  • 8
    Jason Soon
    August 4th, 2009 14:24

    Don
    what’s ‘rubbish’ is an argument by an alleged supporter of smaller government to regulate and prohibit political speech and implicitly giving more powers to the Tax Office!

  • 9
    Don D'Cruz
    August 4th, 2009 14:39

    Mate, so in order to be a supporter of smaller govt you expect me to slavishly agree to crap put out by CIS on this area? Give me a break. If they don’t want to be regulated by the Tax Office, they shouldn’t be putting their hand out for tax benefits.

    What extra powers are you referring to?

  • 10
    Jason Soon
    August 4th, 2009 18:21

    Perhaps you’d like to summarise your arguments for restricting speech. Where is the market failure exactly? Everyone is free to set up their own charity, all charities are equally able to engage in advocacy under the laws, and because they are non-profits they implicitly pay a lower tax rate. And this is bad because?
    This has nothing to do with the CIS as such, green groups probably outnumber bodies like the CIS and the IPA. Therefore you have some theory running whereby the lobbying favours groups you don’t like and you propose to impose collateral damage through implicitly higher tax rates (at the risk of criminal prosecution or excessive compliance costs) on all aspects of civil society because of this. But people on our side are free to set up their own charities, more of them if they want. Also if the problem is the laws that NPF you don’t like lobby for the obvious solution is to make your case in the marketplace. Like a neocon authoritarian you prefer to rig things against your opponents.

    Didn’t John McCain propose roughly similar measures which earned him the scorn of conservative Republicans and libertarians?

  • 11
    Don D'Cruz
    August 4th, 2009 19:13

    You don’t know me, so presume that you do.

    According to you, I’m a neocon authoritarian, which tells me that you really don’t know what the hell you’re talking about.

    I just received e-PreCIS with rubbish written by Greg Lindsay on the topic. I Would it kill the CIS to actually write something that didn’t degenerate into platitudes and cliche?

    When I first started in this area almost a decade ago, I used to get the Left playing all these childish games about avoiding transparency and the like. But as the debate went on, even they realised that transparency and some rules were inevitable to protect the sector.

    The thing that has intrigued me is that the CIS is around ten years behind in the debate on transparency. None of the lessons that others have learned seemed to have registered at the CIS. It’s pretty funny actually.

    There was many an interesting debate on these things years ago. I find it interesting that the CIS just awoke from its coma and decided to make a contribution, a fairly average one at that, so late in the piece. But then again, that is just like the CIS to turn up for a fight long after its over.

  • 12
    Jeremy
    August 4th, 2009 22:49

    Care to tell us what those lessons are, Don?

    And spare us the ‘ad hom’ attacks. They don’t work here. Just stick to arguing your case, we’re all ears.

  • 13
    Don D'Cruz
    August 5th, 2009 02:09

    The primary lesson which the sector is slowly learning is that trust is the currency of the NGO sector. And inefficiency is corrosive of that trust.

    While Australians are incredibly generous, they expect their money to be spent wisely and efficiently. A failure to do so hurts the sector.

    Transparency is important because the way the sector maintains that level of trust is to show clearly how the money is being spent. Rather than complaining about laws governing transparency, the sector should just get on with it and set the highest standards, to the point where they exceed what is required if that is insufficient. Organisations that leverage off the best instincts in humanity have a moral and ethical duty to repay the generosity of its donors by exhibiting the highest standards of accountability and transparency.

    Over the last few years, increasingly one is getting more and more people into the NGO sector from places like the corporate sector where high levels of disclosure are not controversial.

    It is important to remember that the debate over political advocacy and election expenditure is a VERY limited debate. You would probably be struggling to come up with two dozen NGOs which are going to be caught up in this. What is forgotten, conveniently in my opinion, is that vast majority of NGOs steer well clear of politics. This is very much a fringe debate about the sector as a whole.

    Also, Norton in crikey.com.au wrote:
    “Yet unlike political parties which often have professional political staff, many NGOs are either small volunteer organisations or are only incidentally involved in politics. It is much more likely that NGO members and staff will accidentally break the law out of ignorance or inability to understand their obligations.”

    The political NGOs most likely to be caught in the net are not that small. An organisation like the Wilderness Society would have in the vicinity of 100+ paid staff. I don’t consider that small. Greenpeace Australia would have more. As would WWF.
    The NGOs that get involved in politics tend to have a reasonable number of professional staff. In fact, each one would have more staff than the organisational wing of each political party. The Wilderness Society has in-house legal counsel. I presume that the larger ones also have this expertise. While there are volunteers in the sector, the real work is done by paid professionals.

    Because they inhabit the political sphere they are extremely well aware of the law. Norton’s mental picture of what the NGOs look like which are likely to become enmeshed in the disclosure laws, simply does not bear much relation to the reality.

    And I will sledge anyone I feel like. If more Australians sledged we wouldn’t be losing the damn cricket to the Poms.

  • 14
    Andrew Norton
    August 5th, 2009 09:45

    Don – You may be right that the AEC just won’t enforce the law. They did their best to interpret the current statute narrowly. But when the threshold for being caught in the compliance regime is lowered to $1,000 spending on expressing views on parties, candidates or election issues (not $1,000 donations, which is a secondary disclosure requirement) then it looks to me like an attempt to catch very small NGOs, not the big players.

  • 15
    Don D'Cruz
    August 5th, 2009 11:22

    Norton, tell me which small NGOs specifically are you worried about? I would like to know specific names? This is because I have gone through the accounts and done profiles of most of the politically active NGOs over the years and have an intimate understanding of their business models and operations. Give me specific names.

  • 16
    Andrew Norton
    August 5th, 2009 11:49

    Many uni political organisations could be caught by this. The groups calling for gay marriage (gosh, maybe the international homintern is behind it all!). But one of my objections is precisely that it covers tiny organisations nobody would ever have heard of outside of local areas or people who follow their particular issue.

    Even if we accept your general theory of NGOs, it seems ridiculous to apply the rules to volunteer micro-organisations.

  • 17
    Don D'Cruz
    August 5th, 2009 12:16

    You’ve spent too much time at university if you want to scuttle legislation based on the “possible” impact of these tiny, miniscule organisations. I have never heard of the AEC investigating anything like these groups? Do you actually have an example or this is some sort of worst-case scenario?

    What usually happens when new laws are passed is that organisations adapt. Legal advice would be sought and a new set of operating standards devised. It happens all the time. The operations of small organisations continually evolve. I don’t think your argument holds any water. Didn’t your academic board of advisers go through all of this with you?

  • 18
    Jason Soon
    August 5th, 2009 12:48

    So let me get this straight.

    You want to impose high compliance costs on smaller NGOs and in effect create barriers to entry on new NGOs (which might be dissuaded by the paperwork) on the basis of what you yourself admit is only likely a small number of NGOs which may be engaging in more than their ‘fair share’ of political involvement and you’re claiming that this is for the good of the NGOs themselves? That draconian legislation forces them to ‘lift their game’ because otherwise there may be some sort of collective action failure that would dissuade people donating to NGOs? How about letting NGOs themselves self select about the level of transparency they’re willing to give above and beyond existing legislative minima on the basis of their own incentives to increase donations?

    And since when is it bad to impose the burden of proof on new regulations?

    How did a State worshipper like you end working for the IPA?

  • 19
    Andrew Norton
    August 5th, 2009 12:55

    Don – Naturally nobody is complying with a bill still in the Parliament. The currently threshold is nearly $11,000. It will be $1,000 if the bill passes.

    I suspect in practice the AEC would turn a blind eye to most breaches. But plenty of people will want to avoid the risk of prosecution and comply. And there is no point having on the statute books laws nobody intends to enforce.

  • 20
    Don D'Cruz
    August 5th, 2009 13:12

    Norton, so the only groups you can think who might be affected adversely are clubs and societies on campus? You still haven’t given me names of any NGOs for us to discuss specifically.

    As for you, Soon, I found you entertaining initially, but I am getting really bored debating someone who doesn’t know what he is talking about. Go away.

    Back to you, Norton, I just don’t see this as much of a problem. Even the stuff about foreign donations, Greenpeace and WWF get money from overseas for specific campaigns etc. But from what I know of their operations, there are myriad of ways to get around this legally.

    For the record, I don’t think the legislation poses much risk to CIS. It may pose problems for the IPA due to its traditional choice of topics which are extremely topical. But once again, I suspect that this will just cause the IPA to reconfigure itself and its priorities. CIS and IPA will probably end itself locked into fiercer competitition for same segment of the market. This is just purely speculation as I have had no dealings with the IPA for years. It just seems logical.

  • 21
    Jason Soon
    August 5th, 2009 13:24

    Naturally Don it seems you can’t or won’t defend your arguments on first principles once I’ve boiled them down to syllogistic form. You have none, being the typical Tory and partisan hack you are, the member of the Stupid Party, as JS Mill aptly phrased it.

    They do boil down to ‘forcing these regulations on NGOs is good for them because there is a market failure in transparency in the NGO market,’ But you haven’t pointed out how this market failure arises. You can’t prove my parsing of your arguments wrong because it would be too embarassing to your position. The same deductions about the desirability of imposing heavy handed regulations could apply to the corporate sector if we were to take your ‘logic’ seriously.

  • 22
    Don D'Cruz
    August 5th, 2009 13:35

    Good one, razor wit.

  • 23
    Jason Soon
    August 5th, 2009 17:33

    You seem to have 2 completely different justifications for your concern with rigging the marketplace for ideas here.

    The first one from your earlier response was about the danger of ‘soft money’ influencing the political process by political activism beyond the Lib-Lab Hack political oligopolists which you clearly prefer or perhaps represent.

    Putting aside the fact that the whole point of having a political process is for people to engage in dialogue within it and influence each other, I pointed out that the best means of dealing with this was by engaging in it rather than rigging it and providing the mechanism for your political opponents once they got back in power to re-rig it.

    Your second justification was that you were merely forcing higher compliance costs on NGOs as a means of promoting greater transparency which NGOs by themselves had no strong incentives to provide and by doing so, you were actually helping the NGO sector.

    As I pointed out, there is something very fishy about this argument – why wouldn’t the better NGOs have ‘transparency drives’ to differentiate themselves from the crowd once this was perceived to be enough of a problem to lead to a reduction in donations? Where is your evidence that this has become a problem? Where is the analysis that shows that the improvement in transparency leading to an increase in donations to the NGO sector contingent on such regulations exceeds the compliance costs and implicit higher barriers to entry in setting up new NGOs? Surely you need to take account of the total effects on the NGO sector?

    Alas no response. Also a complete ability to ignore the fact that clearly such legislation imposes compliance costs which because the legislation hasn’t yet been enforced isn’t evident yet (well duh).

    Is the first justification the ‘real’ one and the second the ‘fake’ one perhaps?

    The poverty of discourse in the Machiavellian-Straussian Tory right is evident to plain view again

  • 24
    Don D'Cruz
    August 5th, 2009 17:59

    Soon, you are one paranoid individual. You need to get out more.

  • 25
    Jason Soon
    August 5th, 2009 18:23

    Don
    I was merely belabouring the ridiculousness of your second argument. Your first one is there for everyone to see in your 3rd comment down.

    99% of your corpus is about evil NGOs ‘manipulating’ the political process (shock! horror!)

    Methinks with that comment about paranoia you are exhibiting projection.

  • 26
    Don D'Cruz
    August 5th, 2009 18:46

    You should stick to things you understand. You’re out of your depth.

    Have noticed that GetUp! is calling for the threshold to be reduced to $500.00. It would appear that they don’t have any concerns about the $1000.00 threshold.

    Their campaign doesn’t mention anything about third parties. Presumably, they would also be arguing something self-serving.

    I do think that their ban on corporate donations, if coupled with a ban on union donations is probably an idea whose time has come.

  • 27
    Son of the Ratpack
    August 5th, 2009 22:37

    Wow! I haven’t seen anything like this since observing, many years ago, two Trotskyist sects go at each other. I knew that liberals and conservatives were different, but I didn’t realise they hated each other’s guts (just like different species of Trots).

    Don (may I call you Don?) why do you address people by their surnames?

  • 28
    Don D'Cruz
    August 5th, 2009 22:55

    This isn’t hatred, Son of the Ratpack, It’s just a bit of sledging. You obviously don’t play cricket. You really are quite a sensitive soul, aren’t you?

    As for the surnames, I don’t know. Would you like me to refer to you as ‘Son’ or ‘Ratpack.’?

  • 29
    Son of the Ratpack
    August 5th, 2009 23:07

    Don, I’m just observing. I certainly don’t care. It’s not my fight.

  • 30
    Andrew Norton
    August 6th, 2009 10:00

    S of R – You should try Catallaxy.

  • 31
    Sinclair Davidson
    August 6th, 2009 10:05

    There is polite yet robust debate at Catallaxy.

  • 32
    Jason Soon
    August 6th, 2009 10:28

    S of R – there’s no hatred. We just like to play rough.

  • 33
    Sinclair Davidson
    August 6th, 2009 10:31

    No. You’re lying. We hate the bums :)

  • 34
    John Humphreys
    August 6th, 2009 15:30

    Most big NGOs started out as small NGOs and then grew. Compliance and regulatory costs disproportiately effect smaller organisations (both business & NGOs) and so they create a barrier to entry which undermines the natural evolution of the market and civil society.

    Indeed, public choice theory predicts that larger firms should lobby *for* increased government regulation in some instances, as they reduce competition and the regulators are often “captured” by the regulated.

    With regards to transparency and efficiency helping NGOs to get the trust of donors, that is probably true. Consequently, many NGOs will naturally trend towards providing the amount of transparency and efficiency that is demanded. Unfortunately, we do not have the same trend with government which is able and willing to hide their activities and maintain a bloated bureaucracy precisely because they don’t have to answer to donor base.

    Also, none of this justifies greater transparency for the donors.

  • 35
    Don D'Cruz
    August 6th, 2009 16:29

    I’m hardly surprised that John Humphreys can’t find any arguments for greater transparency.

    That’s fine. Nothing will change his mind so that is fine.

    But I do know how the public and media feel about the issue of transparency and that is really all that matters.

    He can wage his “War against Transparency” but after a while it all appears just a bit absurd.

  • 36
    Son of the Ratpack
    August 6th, 2009 18:40

    John and Don, you really are just like two Trots arguing over an obscure point of doctrine. You probably can’t see it never (I presume) having hung around the far left, but the resemblance is uncanny.

    Anyway, I apologise for interrupting. please carry on.